Volvo says discussions are "ongoing" with the Swedish government prior to it formally asking the European Investment Bank (EIB) for a EUR600m (US$770m) loan.

The Swedish automaker - recently bought by Chinese group Zhejiang Geely - is seeking the loan for unspecified environmental projects in the Swedish and Belgian cities of Gothenburg and Gent.

But it must first secure backing from the Swedish authorities to underwrite the loan before proceeding to the EIB application.

"Volvo has not formally made that application," a spokesman for the manufacturer in Sweden told just-auto. "We need to first formalise the initial discussions with the Swedish government and Swedish debt office.

"The timetable is these loans are only available before the end of the year, so [they] have to be secured before [then]. We first need to finish initial discussions with the Swedish authorities - they are on-going as we speak."

The EUR600m loan comprises an additional EUR100m that Volvo has requested in order to cover its plans for a further year until 2013.

Any deal would reinforce the EIB's status as a prime mover in the European automotive industry after it worked with Opel, Ford and Saab earlier this year.

Last year the bank lent EUR79bn - a rise of 37%

The EIB declined to comment on any potential loan to Volvo.

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